CAPPA AUDIT TRAINING December 5, 2018 Presented by Michelle R. Elder, CPA

Transcription

1 CAPPA AUDIT TRAINING December 5, 2018 Presented by Michelle R. Elder, CPA Getting ready for audit: Reviewing your internal controls: a) Segregation of duties b) Lowering risk if a small agency Reviewing and adhering to your Allocation Plan: a) Are you really adhering to your plan. b) Time sheets or study, which one is best c) Your budget is not a plan.

2 800 Howe Avenue Suite 160 Sacramento, CA T (taxs) F Michelle Elder, CPA Owner of Elder Accountancy a full service CPA firm with offices in California and Nevada, where we "look at more than the numbers!" Michelle has been doing accounting, auditing and tax.es for the last 36 years and is licensed in the state of California. Her clients consist of small to medium size business, individuals and not for profit organizations. She specializes in California Department of Education audits, and audits required under the federal guidelines of the "Super Circular" and "yellow book". Other services her firm provides are bookkeeping, payroll, accounting software consulting, CFO for hire and pre-audit preparation. She was the State President of the Society of California Accountants and she is still an active board member. She is also a member of the Internal Revenue Services' Practitioner Liaison Committee in Sacramento. Michelle's activities in the professional community include Coach and Partner with Sacramento Chapter of Social Venture Partners. She was a charter member and Past Treasurer of Luna Vista Rotary in Woodland 2006 to 2012

3 CLIENT: _ DATE: PREPARED BY: - REVIEWED BY: _ SEPARATION OF DUTIES SMALL ORGANIZATIONS Payroll Control Questions to answer: 1. Are attendance and time records used? (Attach sample timesheet) 2. Are time cards signed by the employee? 3. Are time cards approved by the supervisor? 4. Do payroll checks show gross pay and deductions? (Attach a sample) 5. Do payroll checks show leave balances and accruals? 6. Are procedures in place to ensure that payroll taxes are deposited timley? 7. Are records kept of employee's leave balances? 7a. How do employees know their leave balances?

4 CLIENT: _ DATE: INTERNAL CONTROL FOR- SMALL ORGANIZATIONS

5 CLIENT: DATE: SEPARATION OF DUTIES - SMALL ORGANIZATIONS Significant Payroll Control Functions MAINTAIN ATTENDANCE REPORTS; CERTIFICATION OF PAYROLL ATTENDANCE REPORTS; SIGNS REPORTS OF APPOINTMENT AND SEPARATION: SIGNS PAYROLL CHECKS Should Not: Receive or Pick Up Payroll Checks for Distribution Retain Undistributed Payroll Checks PREPARES PAYROLL CHECKS Should Not: Sign Payroll checks Distribute Payroll Checks Retain Undistributed Payroll Checks RECEIVES OR PICK UP PAYROLL CHECKS FOR DISTRIBUTION; RETAINS UNDISTRIBUTED PAYROLL CHECKS Should Not: Maintain Attendance Reports Certify Payroll Attendance Reports Prepare Payroll Checks Sign Payroll Checks Maintain Employee Roster

6 CLIENT DATE 1. WERE THERE ANY INCOMPATIBLE DUTIES IDENTIFIED? WHICH AND FOR WHOM? 2. WHAT COULD GO WRONG? 3. ARE THERE ANY COMPENSATING CONTROLS? 4. HOW SHOULD WE MODIFY THE AUDIT PROGRAM? 5. IS THE SYSTEM ADEQUATE? 5A. HAS THE SYSTEM BEEN IMPLEMENTED? 6. ANY SIGNIFICANT DEFICIENCIES IDENTIFIED? 6A. ARE ANY OF THESE MATERIAL WEAKNESSES?

7 CLIENT: DATE: PREPARED BY: REVIEWED BY: SEPARATION OF DUTIES SMALL ORGANIZATIONS Cash Receipts Control

8 CLIENT: DATE: INTERNAL CONTROL FOR - SMALL ORGANIZATIONS

9 CLIENT: DATE: SEPARATION OF DUTIES - SMALL ORGANIZATIONS Significant Cash Receipts Control Functions *Introduces an element of risk if performed with other duties OPENS MAIL AND RECEIVES CASH; PREPARES PRELISTINGS RECEIVES COUNTER COLLECTIONS; PREPARES RECEIPT FORMS; PREPARES COLLECTION REPORTS Should Not: Prepare Bank Deposits Maintain Receivables Ledger PREPARES BANK DEPOSITS Should Not: Open Mail and Receive Cash Prepare Prelistings Receive Counter Collections Prepare Receipt forms Prepare Collection Reports Reconcile Bank Accounts * Maintain Cash Receipts Journal * Maintain General Ledger Make Bank Deposits RECONCILES BANK ACCOUNTS Should Not: Open Mail and Receive Cash Prepare Prelistings Receive Counter collections Prepare Receipt Forms Prepare Collection reports Prepare Bank Deposits Maintain Cash Receipts Journal Maintain General Ledger MAINTAINS GENERAL LEDGER Should Not: Open Mail and Receive Cash Prepare Prelistings Receive Counter Collections Prepare Receipt Forms Prepare Collection Reports Prepare Bank Deposits Reconcile Bank Accounts

10 CLIENT DATE

11 SEPARATION OF DUTIES SMALL ORGANIZATIONS Significant Cash Receipts Control Functions *lntroduces an element of risk if performed with other duties. OPENS MAIL AND RECEIVES CASH; PREPARES RECEIPT FROMS Should Not: PREPARES BANK DEPOSITS Should Not: Prepare Bank Deposits Maintain Receivables Ledger Open Mail and Receive Cash Prepare Receipt Forms Reconcile Bank Accounts Maintain Cash Receipts Journal Maintain General Ledger RECONCILES BANK ACCOUNTS Make Bank Deposit COURIER Should Not: Open Mail and Receive Cash Prepare Receipt Forms Prepare Bank Deposits Maintain Cash Receipts Journal Maintain General Ledger Lisa has incompatible duties Opens mail Prepares receipts prepares deposit Maintains cash receipts journal WHAT COULD GO WRONG? Lisa could keep cash received ARE THERE COMPENSATING CONTROLS? Sam does check the deposits, but this is not really a compensating control WHAT IS THE RISK OF FRAUD? 96.5% of the revenue received in the mail comes from grant billings and is in check form At fundraising events they have two people collect the cash, count it, and give it to Lisa to deposit with a copy of the amount collected going to George CONCLUSION: Risk of fraud is not great. No audit program modifications required MAINTAINS GENERAL LEDGER Should Not: Open Mail and Receive Cash Prepare Receipt Forms Prepare Bank Deposits Reconcile Bank Accounts

12 CLIENT: FYE 6-30-XX Prepared by: Reviewed by: DATE: INTERNAL CONTROL FOR - SMALL ORGANIZATIONS

13 CLIENT: HELPFUL NPO EYE Prepared by: Reviewed by: DATE: INTERNAL CONTROL FOR - SMALL ORGANIZATIONS

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